A linear programming model of the urban housing and land markets: Static and dynamic aspects

An extension of the Herbert-Stevens model is presented which incorporates the dynamic aspects of the housing market in order to simulate the filtering process. An open city is assumed with an exogenously given welfare level of the households and constant returns to scale in production. The bid-rent function can thus de defined independently of the resource allocation within the city. The maintenance policy of the landlords is endogenously determined allowing conservation, deterioration, as well as upgrading. Although the model has a normative formulation, the resulting allocation stipulates a competitive equilibrium. The model can be employed to show that discontinuous development can represent an efficient resource allocation.